Massmart - Deputy Chairman and Chief Executives statement

Massmart - Deputy Chairman and Chief Executives statement                       
MASSMART HOLDINGS LIMITED                                                       
(Incorporated in the Republic of South Africa)                                  
(Registration Number 1940/014066/06)                                            
Share Code: MSM             ISIN: ZAE000029534                                  
("Massmart" or "the company")                                                   
Deputy Chairman and Chief Executives statement at the 2006 Annual General       
Meeting of the company                                                          
Environment                                                                     
Although year on year retail sales growth at constant 2000 prices as reported by
Stats SA peaked in October 2004 at 12.2%, it has remained high ever since.  In  
2005 it averaged a robust 6.6% and accelerated to 9% in the subsequent ten      
months to August 2006, substantially higher than the 6.4% recorded in the       
previous comparable period.                                                     
While this acceleration occurred contrary to the expectations of most           
commentators, it confirmed our long held view on the changing South African     
retail market. For over four years we have referred to the "structural" factors 
which are enhancing the amplitude and duration of the current cycle, which has  
now endured for over five years.  The transformation of our society, manifest   
most visibly in increasing workplace equity, has irrevocably altered the profile
of the South African consumer economy.  This, together with the adept fiscal and
monetary management which our Government continues to demonstrate, has created a
solid platform for competent retailers.                                         
Progress                                                                        
Against this background, I am pleased to report to shareholders on Massmart"s   
considerable progress since our 2005 Annual General Meeting.                    
Much of our achievement over the past twelve months is captured in the Massmart 
2006 Annual Report, which describes how strategic evolution, structural         
development and operational control converged to produce a group-wide record    
performance in the year to June 2006.                                           
Besides raising our general level of disclosure and sustainability reporting to 
new heights, the report comments extensively on a number of developments that   
will influence the performance and value of Massmart for many years to come.    
Most notable among these were:                                                  
the Massbuild definition of the strategy, structure, formats, footprint and     
brands necessary to integrate the building assets acquired over the past three  
years, as a national "Builders" chain under a unified management team           
a succession process which culminated in the appointment of Grant Pattison as   
CEO Designate from 1st June 2006 to succeed me as CEO on 1st July 2007          
and                                                                             
the R1billion staff empowerment transaction, which provides 14 500 staff members
with ownership of approximately 10% of Massmart, including rights to vote and   
earn dividends.                                                                 
These seminal developments were underpinned by two dominant strategic themes    
which drove sales growth and profitability as reported on for the year to June  
but continue to do so in the current year.  The first, the pursuit of high      
comparable sales growth as a foundation for aggressive new store development, is
manifest since June in gradually improving real comparable store growth  and 10 
new stores (including a new format Dion Wired store) that will be opened before 
Christmas.  The second, the elimination of cost and complexity through the      
simplification of the structures and processes of the Group, continues apace    
with investment in systems, the disposal or integration of smaller businesses   
and the optimal deployment of talented management across four large, clearly    
focussed divisions, each a leader in its chosen market segment.                 
After 21 weeks of trading in the current financial year, all Massmart divisions 
are enjoying strong sales growth and considerably stronger profit growth.       
Board Appointments                                                              
We are pleased to welcome Ms. Lulu Gwagwa and Mr. Kuseni Dlamini to the Massmart
board with effect from the 1st November 2006.  The fifteen member Massmart board
now comprises four executive directors and eleven independent non-executive     
directors who have a broad range of strategic, financial, retail, human capital 
and socio-political expertise.  The diversity of the Board is further enhanced  
by the fact that three of these directors are Black women and two Black men.    
Sale of shares                                                                  
Since the last Annual General Meeting, in anticipation of my transition from    
Chief Executive to Non-Executive Chairman in July 2007, I have disposed of a    
portion of my Massmart shares, the most recent tranche last week.  While my     
preference would have been to retain my investment in Massmart, my view is that 
in my future role as Non-Executive Chairman, my independence as well as my      
interface and relationships with the Board and Executives will be enhanced by a 
lesser shareholding.                                                            
Prospects                                                                       
Although it can be expected that the tightening of monetary policy in response  
to gradually rising inflation will slow the extraordinary rate of retail sales  
growth, not all retailers will be affected equally.  Massmart is uniquely       
positioned in South African retail.  Any susceptibility to economic cycles      
resulting from its leadership in the general merchandise and home improvement   
sectors (52% of Group sales), is mitigated both by its participation in         
wholesale food and its cash profile (consumer credit constitutes only 1.2% of   
Group sales).  Massmart cannot be compared to the furniture or fashion credit   
retailers who are more cyclical or the food retailers who are less so.          
This time last year we predicted that the growth of retail sales (particularly  
credit sales) would decline gradually as the South African Reserve Bank raised  
interest rates.  Recent reports from credit retailers confirm this but Massmart 
has yet to see any decline in comparable store and total sales growth.          
With weighted inflation across the Group of 3%, sales from continuing operations
for the 21 weeks to the 19th November 2006 grew 16.7% and comparable store sales
grew 12.6% both significantly higher than at this time last year. Sales before  
new stores opened in the current year grew 16%.                                 
There is every indication that this will be an exceptional Christmas for        
Massmart.  In each division the merchandise proposition is innovative and well  
priced, the marketing appeal is focussed and pervasive, and control of supply   
chain, expenses and working capital is at an all time high.  Given the current  
pace of consumer activity in our 236 stores and the operational efficiency of   
our business, Massmart will enjoy a good first half with sales growth ahead of  
the comparable period in 2005, and higher profit margins notwithstanding an 8.6 
cents per share IFRS 2 charge arising from Thuthukani, our Black Economic       
Empowerment transaction.                                                        
While it is difficult to predict the impact of rising interest rates on sales   
growth in the second half, we remain confident that profits will grow at a much 
higher rate than sales for the full year notwithstanding a 21.3 cents per share 
charge arising from Thuthukani.                                                 
MARK J. LAMBERTI                                                                
Johannesburg                                                                    
22 November 2006                                                                
Date: 22/11/2006 09:21:05 AM Supplied by www.sharenet.co.za                     
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